Retirement Planning

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Not too long ago, most working Americans could expect a comfortable retirement paid for by Social Security and their company pension plans. But times have changed.

If you were born after 1960, retirement is considered age 67.

Social Security has lost ground, weakened by inflation and an aging population. At best, Social Security can only replace a portion of a person’s pre-retirement income.

Company pension plans are changing too. To control costs, many employers are shifting the responsibility for retirement planning to their employees. What’s more, today’s worker is simply not staying with one company long enough to collect a full pension. After each job change, pension savings must start from scratch.

But, you can have a comfortable retirement. Here’s how:

While Social Security and company pension plans can contribute to your retirement income, you’ll need to come up with much of your retirement “nest egg” yourself. When it comes to saving for retirement, you have three important allies: time, compound interest and tax-deferred growth.

Time. The sooner you start, the better off you’ll be. Its easier to fund for retirement over a longer period than it is over a shorter one, so start as soon as you can.

Compound interest is a wonderful thing. Regular contributions to a retirement account, earning compounded rates of return, can add up to a large sum over a long period of time.

Tax-deferred growth is really a wonderful thing. Many financial instruments, such as annuities and life insurance may build cash values on a tax-deferred basis. These financial instruments provide a triple compounding affect: they earn interest, they earn interest on interest, and they earn interest on the funds normally used for taxes.

In the case of permanent life insurance, while the policy is in force, income tax may never be required. For annuities, withdrawals of interest earned is subject to income tax and withdrawals prior to age 59-1/2 are also subject to a 10% IRS penalty.

Don’t forget to include your life insurance in your retirement plans

Life insurance can serve as both a tax-deferred way to build retirement funds and a way to provide for your family if you should die. Special riders are available for most policies to pay the premiums if you become disabled, something most investment-type products can’t do.

Getting Started

Without retirement planning, you can end up with a serious gap between what you need and what you have. The steps you take today can protect your lifestyle during retirement.